Employees of objecting non-profit religious organizations will receive “no-cost contraceptive coverage through separate individual health insurance policies” issued through insurance companies or a third party administrator, said the Obama administration.

Insurance issuers will generally be able to offer this coverage free of cost, it asserted, because “they would be insuring the same set of individuals under both policies and would experience lower costs from improvements in women’s health and fewer childbirths.”

On Feb. 1, the Department of Health and Human Services, announced that it was taking the next step in updating its controversial contraception mandate. It unveiled a Notice of Proposed Rulemaking explaining its intent to propose a new rule amending the religious freedom exemption and establishing the details of a religious freedom “accommodation” for the mandate.

Issued under the Affordable Care Act, the mandate requires employers to offer health insurance plans covering contraception, including some drugs that can cause early abortion, as well as sterilizations.

Faced with a wave of protest from objecting religious organizations, the Obama administration announced in early 2012 that it intended to modify the mandate. It issued a one-year “safe harbor” delaying the implementation of the mandate for these organizations while it considered various proposals for an “accommodation” for religious liberty.

In recent months, more than 40 lawsuits have been filed challenging the mandate, while religious leaders have spoken out against the narrow definition of religion adopted by its provisions.

The newly-issued notice suggests simplifying the definition of “religious employer” used for an exemption. The original mandate included an exemption that was widely criticized for its narrow scope, requiring entities to pass a four-prong test to qualify.

Three of these prongs may now be eliminated, the administration said, explaining that it intends to drop the provisions requiring an exempt entity to exist for the purpose of inculcating religious values and to serve and employee primarily members of its own faith.

The simplified definition of a non-profit religious employer would follow Internal Revenue Code, Section 6033(a)(3)(A)(i) or (iii), which “refers to churches, their integrated auxiliaries, and conventions or associations of churches, as well as to the exclusively religious activities of any religious order.”

This “would primarily include churches, other houses of worship, and their affiliated organizations,” the administration said.

Therefore, if a church, mosque or religious order runs a soup kitchen or a parochial school, it could qualify for the exemption, even if it serves members of other faiths. However, a religious organization that does not fall within these definitions – including many religious charities, schools and hospitals – would not be exempt.

The Notice of Proposed Rulemaking offered suggestions on an “accommodation” for these religious groups that object to the mandate but do not qualify for the exemption.

Non-profit religious organizations would qualify for the accommodation if they oppose providing some or all of the coverage for religious reasons. According to the administration, “eligible organizations would not have to contract, arrange, pay or refer for any contraceptive coverage to which they object on religious grounds.”

In the case of self-insured organizations, a third-party administrator would work with a health insurance issuer to provide this coverage.

Such coverage would be “cost neutral,” the administration argued, because, as the Institute of Medicine has claimed, “there are tremendous health benefits for women that come from using contraception,” and these health benefits will lower the overall cost of their health care.

“The costs of both the health insurance issuer and third party administrator would be offset by adjustments in Federally-facilitated Exchange user fees that insurers pay,” it added.

The proposal would also allow for a comparable arrangement for colleges that offer student health insurance plans.

The accommodation would not apply to for-profit businesses run by religious individuals who object to providing the coverage. More than a dozen for-profit companies have filed lawsuits over the mandate, including arts and crafts giant Hobby Lobby and several other manufacturers, publishers, medical groups and other employers.

The Department of Health and Human Services acknowledged that it had received about 200,000 comments from the public since it first announced its intent to issue an accommodation.

Some of those commenters had voiced concern over religious freedom issues, it said, and some had “disputed the claim that contraceptive coverage is at least cost neutral and argued that plan sponsors would end up funding the coverage in the form of higher premiums or fees.”

The public can now comment on the department’s Notice of Proposed Rulemaking until early April, after which the administration will take further steps in proposing and finalizing the new rule before the mandate goes into effect for non-profit religious employers in August.